Indonesia's economy to grow by 3 percent: Kwik

Indonesia's economy to grow by 3 percent: Kwik

SINGAPORE (Dow Jones): Indonesia's economy will grow by 3
percent next year and strengthen further by 5 percent to 6
percent in 2001, Coordinating Minister for the Economy Kwik Kian
Gie said Monday.

Kwik's latest update on the economy, in a speech scheduled to
be delivered to the Singapore Chinese Chamber of Commerce and
Industry at 0700 GMT, marks the government's most positive
forecast to-date.

Any prediction of future economic activities is risky, we are
hopeful that economic growth can reach 3 percent next year, with
a return to a growth rate of 5 percent to 6 percent the year
after," he said.

He noted that signs of a strong recovery are emerging, as
particularly evidenced in the car and retail sales figures.

Car sales have rebounded steadily since the peaceful passing
of the country's parliamentary election in June.

He said strong retail sales and the 15 percent rise in exports
between August to October, compared with a year ago, offers cause
for optimism.

However, damping the country's economic growth is the costly
bank recapitalization program.

Kwik said the fiscal burden of the financial sector
restructuring weighs heavily on the government budget.

Interest payments to service government bonds issued to
recapitalize weak banks will amount to 4 percent of Indonesia's
gross domestic product next year and absorb more than 10 percent
of the central government's budget in the next fiscal year, he
said.

Under the recapitalization program, the government plans to
issue a total of over 350 trillion rupiah (US$46 billion) worth
of bonds to recapitalize both state and private banks.

While private banks' recapitalization is on track, there are
repeated delays in recapitalizing the four state banks.

So far, only Bank Mandiri has received some portion of the
government bonds while the other three haven't been recapitalized
at all.

"Full recapitalization of the state banks will be accomplished
by the middle of next year to be followed by majority divestment
of key state banks," Kwik said.

Key to minimizing this financial burden, Kwik noted, is the
acceleration of the privatization of state-owned enterprises and
recoveries of assets acquired by the Indonesian Bank
Restructuring Agency.

Kwik said the government will divest majority stakes in state
telecommunication companies next year.

"Next year, we hope to divest majority ownership in our state
telecommunication firms," he said, without providing further
details.

The previous government already sold a 9.6 percent stake in
domestic phone operator PT Telekomunikasi Indonesia in April to
international institutional investors, bringing in about $404
million.

The government also sought to sell a stake in international
phone operator PT International Satellite Corp. though similar
avenues, but failed to drum up enough interest at the right
price.

This is the first time the government has expressed an
interest in selling majority stakes in both companies, both of
which are major blue chips listed in Jakarta and in New York.

Other assets tagged for sales are the shares of Bank Central
Asia, formerly the largest private bank in the country, and 30
percent of PT Astra International.

The government plans to list BCA's shares on the Jakarta stock
exchange early next year, while Astra's stake will be sold
through a public tendering in the coming weeks.